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The latest episode of the Claims Insight Podcast by Swiss Re Corporate Solutions addressed the issue of class action lawsuits trends in Europe and the challenges ahead. Hosted by Marc Scheidegger, Chief Claims Officer of Swiss Re Corporate Solutions, this episode tried to answer key questions around the impact of the Representative Action Directive on consumers and businesses and the fast-raising industry of third-party litigation funding, together with Moya Stevenson, Senior Claims Counsel, Casualty, FinPro & Aviation at Swiss Re, and Stefaan Voet, Professor of Law at KU Leuven Centre for Public Law. Moya is, of course, the current Chair of EJF.

The Representative Action Directive, which is currently under transposition at national level, puts in place a new legal system that enforces consumers’ rights collectively while allowing cross-border actions and third-party funding of litigation. The latter, however, creates several legal uncertainties in terms of funders’ role in the claims as well as bringing the risk of conflicts of interests. It is also unclear, according to the two guests, how much third-party funders would be able to earn out of the final compensation allocated by the judge, and how a conflicting situation can be solved in case funders want to accept the settlement offered by a judge and the redress beneficiaries do not. In this new regulatory framework third-party litigation funders and their economic interests will probably become one of the main drivers of collective claims.

To the question of how businesses can lower the risks of collective litigation, the speakers agreed that regulators often do and should play an important role. They should therefore step in to design further measures to reduce harm for consumers, also reducing the need for escalation of disputes into courts. To bring an example, an interesting proposal from the European Commission within the revision of the 2013 ADR Directive would extend the outcome of an ADR case to other claims as well, preventing those others from being brought before court (being the costliest and most time-consuming way of solving disputes).

This expert episode concludes that class action litigations will be for most businesses a novelty, where numerous new players/advisors will be involved besides lawyers, such as funders and insurers. This will result in a more complex litigation procedure that will require new legal strategies and acumen. The main challenge for business will be therefore to ensure that a strategy to respond and resolve disputes is in place, in order to minimize the negative effects on justice.

You can listen to the entire podcast for more insights here.

After 2 long years of pandemic, practitioners and academic experts resume gatherings to find solutions to issues of solving mass disputes fairly and effectively that have the potential to impact European justice. On this occasion, Alternative Dispute Resolution (ADR) took the spotlight.

In November 2022, Dr. Herbert Woopen, Director of Legal Policy of EJF, together with Dr. Lorenz Ködderitzsch, the former long-term Chair of EJF, contributed to the Panel “Feedback and Affecting Behaviour” in the context of ADR and provided views on how to develop the ideal holistic domestic infrastructure for dispute resolution. Whether a consumer is attempting to solve a dispute in court, out of court or with the intervention of a regulator as public authority, the structure of the task to be accomplished is always the same: (i) capture disputes and details as well as potential beneficiaries; (ii) define comparable cases in view of a solution; (iii) clarify applicable rules and legal norms; and (iv) negotiate or impose a solution.

To streamline this process, appropriate IT infrastructure should be set up. Such support for resolution tools could be essentially the same for all three pathways, as a high quantity of cases require digitization. It is against this background that Dr Woopen proposes a functional IT architecture: a single central electronic register that would be fed by consumers themselves, by consumer associations, by European Consumer Centres, by the public entities created by the Consumer Protection Cooperation Regulation for cross-border cases or by sectorial, other and residual ADR entities as sources.

For a deep dive into the present topic, see the full presentation here.

While collective redress mechanism and third-party litigation funding (TPLF) are meant to have a positive impact for consumers in facilitating the access to justice, there is the risk – if no sufficient safeguards are put in place –, that private funders’ interests (esp. their interest in commercial profit) may be disconnected from – or even opposed to – consumers’ interests. Concrete examples can be seen in the US or in Australia. Also in Europe, such cases are meanwhile increasing and tend to spread.